First National Financial Corporation reports third quarter 2015 results, increases common share dividend

23 févr. 2016

For Immediate Release

Toronto, Ontario, February 23, 2016 – First National Financial Corporation (TSX: FN, TSX: FN.PR.A) (the “Company” or “FNFC”) today announced its financial results for the fourth quarter and year ended December 31, 2015. The Company derives virtually all of its earnings from its wholly-owned subsidiary, First National Financial LP (“FNFLP” or “First National”).

2015 Summary

  • Mortgages under administration (“MUA”) $93.8 billion up 9% from $85.9 billion at December 31, 2014
  • Mortgage originations $17.3 billion up 7% from $16.2 billion in 2014
  • Revenue $915.3 million, up 14% from $803.1 million in 2014
  • Net income $109.4 million ($1.71 per common share), compared to $104.5 million ($1.62 per common share) in 2014, a 5% increase
  • Income before income taxes $148.7 million, compared to $140.3 million in 2014, a 6% increase
  • Pre-FMV EBITDA(1) $209.9 million, compared to $183.1 million, a 15% increase

Fourth Quarter Summary

  • MUA up 5% on an annualized basis
  • Mortgage originations $4.2 billion compared to $4.1 billion a year ago
  • Revenue $250.0 million, compared to $198.3 million, a 26% year-over-year increase
  • Net income $41.1 million ($0.66 per common share) compared to $17.9 million ($0.27 per common share), a 129% increase
  • Income before income taxes $56.4 million compared to $23.2 million a year ago, a 143% increase
  • Pre-FMV EBITDA(1) $58.5 million, compared to $43.2 million a year ago, a 35% increase

(1) Non-GAAP Measure. See Non-GAAP Measures section of this news release

“First National’s record results for 2015 reflected the ongoing benefits of non-bank mortgage lending across both residential and commercial markets, generally strong conditions in those markets and our team’s dedication to customer service supported by best in class technology,” said Stephen Smith, Chairman and CEO. “Compared to the prior year, growth was registered in all key financial metrics including MUA, revenue, income before income taxes, Pre-FMV-EBITDA and net income and this enabled us to distribute more income to shareholders than ever before. We are pleased with the Company’s performance and delighted that First National is now the first choice of even more Canadian borrowers and their advisors.”

Record results were achieved in 2015 despite a downturn in mortgage demand in Western Canada, which was hurt by the energy sector’s retraction and volatility in the bond market which led to losses on financial instruments.

 “2015 was not without its challenges but First National more than offset those by adhering to its business model,” said Moray Tawse, Executive Vice President. “Notably, mortgage originations and renewals both increased in 2015 as well as the fourth quarter. We transitioned our new third party underwriting and fulfillment services business to profitably on schedule. And, as is standard practice, grew the business prudently such that most of our MUA was funded through sources that resulted in little or no residual credit risk to the Company.”

Quarter ended Year ended
December 31, 2015 December 31, 2014 December 31, 2015 December 31, 2014
For the period ($ 000's)
Revenue 250,008 198,254 915,315 803,107
Income before income taxes 56,384 23,206 148,676 140,305
Pre-FMV EBITDA(1) 58,527 43,229 209,933 183,130
At Period end
Total assets 27,926,732 25,953,914 27,926,732 25,953,914
Mortgages under administration 93,829,513 85,889,561 93,829,513 85,889,561

(I) This non-IFRS measure adjusts income before income taxes by adding back expenses for amortization of intangible and capital assets (generally described as EBITDA) but it also eliminates the impact of changes in fair value by adding back losses on the valuation of financial instruments and deducting gains on the valuation of financial instruments. See also the section “Non-GAAP Measures” in this news release for additional detail.

Q4 2014 and 2015 Annual Results

First National’s MUA increased 9% to a record $93.8 billion at December 31, 2015 compared to $85.9 billion at December 31, 2014. Between September 30, 2015 and December 31, 2015 (the fourth quarter), MUA grew at an annualized rate of 5%.

In the fourth quarter of 2015, single-family mortgage originations were $2.9 billion, up 2%, from the corresponding period of 2014, in spite of a 4% decrease in volumes generated in regions of Western Canada hurt by the downturn in the energy sector. In the fourth quarter of 2015, commercial segment originations increased 8% to $1.3 billion from $1.2 billion in the same period of 2014. Single family mortgage renewals were $1.2 billion in the fourth quarter of 2015 compared to $0.8 billion in the fourth quarter of 2014. Commercial segment mortgage renewals were $0.3 million, substantially unchanged from the fourth quarter of 2014.

For all of 2015, single-family originations grew 3% to $12.9 billion from $12.5 billion in 2014, in spite of an 11% year-over-year decrease in origination volumes from the Company’s Calgary operation for reasons outlined above. For all of 2015, commercial originations grew 19% to $4.4 billion from $3.7 billion in 2014.

Single family mortgage renewals were $4.3 billion for all of 2015, up 26% from $3.4 billion in 2014 as a result of more renewal opportunities and slightly higher retention rates. Commercial mortgage renewals in 2015 were $0.9 billion, down from $1.3 billion in 2014 as more borrowers elected to refinance with the Company at increased mortgage values on maturity.

On a combined basis, the Company’s total (single family and commercial) originations and renewals amounted to $22.5 billion in 2015, compared to $20.9 billion in 2014, an increase of 7%.  The Company originated and renewed for securitization purposes $2.1 billion of mortgages in the fourth quarter and $8.4 billion for all of 2015 in order to take advantage of attractive spreads.

Fourth quarter 2015 revenue increased 26% to $250.0 million from $198.3 million in 2014 on account of steady growth in interest income on securitized mortgages, higher placement fees, a reversal of losses on account of financial instruments incurred in the 2014 quarter and revenue from the Company’s underwriting and fulfillment services business. Annual 2015 revenue grew 14% to $915.3 million, from $803.1 million in 2014 as a result of revenues from the Company’s underwriting and fulfillment services business which opened for business in January 2015, and growth in placement fee revenue and interest revenue. These increases were partially offset by higher losses on financial instruments which reduced revenue by $17.2 million year over year.

Income before income taxes in the fourth quarter increased 143% to $56.4 million from $23.2 million in the fourth quarter of 2014 and for all of 2015 increased 6% to $148.7 million from $140.5 million in 2014. Growth in 2015 was achieved despite changes in the capital markets which negatively affected the Company’s interest rate hedges and led to losses on financial instruments of $52.1 million in 2015 compared to $34.9 million in 2014. In the fourth quarter, such changes were also significant, increasing income before income taxes by $17.7 million year over year

Without the impact of gains and losses on financial instruments, which can be volatile, the Company’s Pre-FMV EBITDA for the fourth quarter of 2015 increased 35% to $58.5 million from $43.2 million in the fourth quarter of 2014 and for 2015 increased by 15% to $209.9 million from $183.1 million in 2014. Growth in both 2015 periods primarily reflected increased earnings from securitization and the transition to profitability of the Company’s underwriting and fulfillment processing services business. In the fourth quarter of 2014, the Company incurred start-up costs for this business and did not earn revenues.

Dividends and Common Share Dividend Ratio

The Board declared common share dividends in the fourth quarter of 2015 based on the current annual rate of $1.55 per share (increased from $1.50 annualized effective with the payment made on December 15, 2015). The ratio of dividends paid to earnings available to common shareholders was 58% for the quarter of 2015 and 88% for all of 2015, compared to 140% and 92%, respectively in the corresponding periods of 2014.

During the fourth quarter, the Board also declared regular quarterly dividends on the 4.65% Class A Preference Shares for the period October 1 to December 31, 2015. The dividend of $0.290625 per share was paid on January 15, 2016 to holders of record at the close of business on December 31, 2015.


Looking forward, the Company expects the low interest rate environment, which was reinforced with January and July 2015 Bank of Canada rate cuts, to continue into 2016. Low rates will keep mortgage affordability at favourable levels and mitigate refinancing risk. The Company will focus on the significant value of renewal opportunities and its partnerships with institutional customers in order to maximize profitability. Management expects the Company to continue to generate cash flow from its $25 billion portfolio of mortgages pledged under securitization and $69 billion servicing portfolio that will maximize financial performance. First National also expects the underwriting and fulfillment processing services business to continue to add to earnings as mortgages processed increase in response to the Company’s superior service levels to the mortgage broker distribution channel.  

Conference call and webcast

February 24, 2016 3 pm ET




The audio of the conference call will be webcast live and archived on First National’s website at A question and answer session for analysts and institutional investors will be held following management’s presentation.

A taped rebroadcast of the conference call will be available to listeners until 6 pm on March 2, 2016. To access the rebroadcast, please dial 647-436-0148 or 888-203-1112 and enter passcode 8425602 followed by the number sign. The webcast is also archived at for three months.

Complete consolidated financial statements for the Company as well as management’s discussion and analysis are available at and at

About First National Financial Corporation

First National Financial Corporation (TSX: FN, TSX: FN.PR.A) is the parent company of First National Financial LP, a Canadian-based originator, underwriter and servicer of predominantly prime residential (single-family and multi-unit) and commercial mortgages. With more than $93 billion in mortgages under administration, First National is Canada’s largest non-bank originator and underwriter of mortgages and is among the top three in market share in the mortgage broker distribution channel.  For more information, please

Non-GAAP Measures

The Company uses IFRS as its accounting framework. IFRS are generally accepted accounting principles (GAAP) for Canadian publicly accountable enterprises for years beginning on or after January 1, 2011. The Company also refers to certain measures to assist in assessing financial performance. These “non-GAAP measures” such as “Pre-FMV EBITDA” and “After tax Pre-FMV Dividend Payout Ratio” should not be construed as alternatives to net income or loss or other comparable measures determined in accordance with GAAP as an indicator of performance or as a measure of liquidity and cash flow. Non-GAAP measures do not have standard meanings prescribed by GAAP and therefore may not be comparable to similar measures presented by other issuers.

Forward-Looking Information

Certain information included in this news release may constitute forward-looking information within the meaning of securities laws. In some cases, forward-looking information can be identified by the use of terms such as "may", "will, "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "potential", "continue" or other similar expressions concerning matters that are not historical facts. Forward-looking information may relate to management's future outlook and anticipated events or results, and may include statements or information regarding the future financial position, business strategy and strategic goals, product development activities, projected costs and capital expenditures, financial results, risk management strategies, hedging activities, geographic expansion, licensing plans, taxes and other plans and objectives of or involving the Company. Particularly, information regarding growth objectives, any future increase in mortgages under administration, future use of securitization vehicles, operation of the underwriting and fulfillment services business, industry trends and future revenues is forward-looking information. Forward-looking information is based on certain factors and assumptions regarding, among other things, interest rate changes and responses to such changes, the demand for institutionally placed and securitized mortgages, the status of the applicable regulatory regime and the use of mortgage brokers for single family residential mortgages. This forward-looking information should not be read as providing guarantees of future performance or results, and will not necessarily be an accurate indication of whether or not, or the times by which, those results will be achieved. While management considers these assumptions to be reasonable based on information currently available, they may prove to be incorrect. Forward looking-information is subject to certain factors, including risks and uncertainties listed under ‘‘Risk and Uncertainties Affecting the Business’’ in the MD&A, that could cause actual results to differ materially from what management currently expects. These factors include reliance on sources of funding, concentration of institutional investors, reliance on relationships with independent mortgage brokers and changes in the interest rate environment. This forward-looking information is as of the date of this release, and is subject to change after such date. However, management and First National disclaim any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future , except as required under applicable securities regulations.

- 30 -

For further information:
Robert Inglis
Chief Financial Officer
First National Financial Corporation
Tel: 416-593-1100

Ernie Stapleton
Tel: 905-648-9354